COTECNA INSPECTION SA Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) Present writ petition has been filed challenging the certificate dtd. 2/11/2021 and communication dtd. 26/11/2021 issued by Respondent No. 1. Petitioner also seeks directions to Respondent No. 1 to issue a fresh certificate under Sec. 197 of the Income Tax Act, 1961 (hereinafter referred to as "the Act') prescribing a tax withholding rate of 5% on dividend of Rs.21,05,26,160.00 for the Financial Year 2021-22 in accordance with the India Switzerland DTAA read with the protocol and Most Favoured Nation ("MFN" ) clause.

(2.) Learned counsel for the Petitioner states that vide the impugned orders, the application of the Petitioner under Sec. 197 of the Act had been disposed of prescribing a rate of 10% on the dividends distributed by Cotecna Inspection India Private Limited ("CIIPL" ) to the Petitioner as opposed to the applicable rate of 5% under the India-Switzerland Double Taxation Avoidance Agreement ("DTAA" ) read with the MFN clause and the Amending Protocol to the DTAA.

(3.) He submits that the Protocol to India Switzerland DTAA provides for MFN clause in terms of which when India enters into a DTAA with another member country of the Organisation for Economic Cooperation and Development ("OECD" ), wherein India limits its tax deduction at source ("TDS" ) to a lower rate than the agreed one between India and Switzerland, then from the date such agreement comes into force, the rates or scope contemplated in such other treaty shall apply to India-Switzerland DTAA. He states that though the India-Switzerland DTAA prescribes a withholding rate of 10%, yet as India has entered into DTAAs with other OECD member countries being Slovenia / Lithuania / Colombia wherein tax rate on dividend income was agreed at a lower rate of 5%, owing to the MFN clause, the lower withholding rate shall also be applicable to any dividend income covered under the India-Switzerland DTAA.